Kohl's

Have you ever seen a t I always t But I have so much more to talk about beyond their logo. I'm guessing most people know about Kohl's. They're a Fortune 500 company and by sales they're among the largest retailers in the US. There's over 1100 of them located in 49 US states. The one remaining state is Hawaii. There's a more detailed geograp Their biggest presence is in the Midwest, w But I they've actually said that 85% of the US population lives wit But if by chance you're not familiar, I would describe them as an altered version of your typical department store. They sell mostly clot Here's their sales mix. It's what you would expect to see, women's, men's, home, c From the very beginning, they've always found success by avoiding they've always targeted those middle class customers and that's where most of their sales have come from over the years. Now, I t Online shopping is taking over, so fewer people are going to stores, w And once the malls start failing, it compounds the issue for the stores in those malls. As a result, in my experience So most of the retailers I talk about on t And then there's Kohl's, w Looking at the past seven years, their sales have only had minor fluctuations. It's actually amazing how little they've changed. 19. 3 billion in 2012 and then 19. 2 billion in 2018. Some years they would open a few stores and then some years they would close a few, but it's resulted in a net gain of only 13 stores over their same store sales are in a similar situation. They go up and down, but it pretty much evens out. Even going back a few more years, we would see a little more growth happening, but honestly, they've moved too much. I would say that they've hardly moved in about a decade, so their level of success really depends on how you look at it. Now I'm choosing to look at the glass half-fold because I've already talked about enough failing retailers, and considering their circ So I want to talk about what they've been doing to maintain t Max Kohl is where the name comes from. He immigrated to the US from Poland in the early 1900s. He found a job working in a factory for a few years until he was able to save up enough money to open a small grocery store in Milwaukee. That grocery store was called Kohl's, and over the next 35 years, Max Kohl and About 20 years later, they opened a much larger grocery store. I don't By 1962, all the grocery stores were doing well, and the Kohl's family thought it would be a good idea to branch off by opening their first department store. They used the same name, so for their new endeavor, they were able to carry over their reputation and name recognition of the supermarket chain and used it to propel them forward. After its first 10 years, that department store chain was up to five locations, and here's where t In 1972, the Kohl's family sold an 80% interest of all the stores they owned to the British American Tobacco Company, and six years later, they sold the remaining 20%. Why would they want to sell their family business to a tobacco company, and why would a tobacco company want to own t Well, I can help explain some of it. On the end of the Kohl's family, it's a bit of speculation, but I feel By t I'm guessing he just wanted to retire and get some relief from the business, and I say that because he did retire after selling that remaining 20%. Also, his son, it looks He was in a key management role up until that final sale, and from there, in the 1980s, he went on to buy the NBA team the Milwaukee Bucks and become a US Senator representing Wisconsin. On the end of the Tobacco Company, it was actually really common in the industry to start diversifying For the British American Tobacco Company, they set their focus on retailers. Kohl's was their first big acquisition and they went on to buy a few others, including Saks Fifth Avenue. The trend didn't last long though. Wit To finish up on the grocery store chain, it's just kind of weird to me. The idea of Kohl'selling food, I'm guessing it is for most of you too, because they never made it outside of the Wisconsin area and haven't even been around for years now. In 1983, the British American Tobacco Company separated the two chains and sold the grocery store chain to A&P, w But for now, I'll just tell you that they operated the chain for the next 20 years before closing down all 23 locations in 2003. I have to admit, I would not mind seeing that come back in some way, just for the novelty of it, but I don't Back to the department stores. British American Tobacco held on to them and actually expanded them from 5 to 40 locations over the 8 year period in w Then in 1986, a group of investors led by some of Kohl's managers bought the company. That was followed by some other changes of owners The money they made from it was put toward opening new stores at a projected rate of about 15 a year, and what actually ended up happening exceeded those expectations. Here's the graph so you can see it yourself. In about 15 years, they expanded from around 100 to 1000 locations. 1. 3 billion in revenue to over 16 billion. But as I said earlier, they really slowed down at that point and have hardly moved for almost a decade now. But they haven't been failing either, so I feel Taking it back to basics, if internet shopping is the main issue going on here, then Kohl's and any other physical retailer should make it their goal to provide reason for people to get out of their home and go into their store. Don't worry as much about costs and demograp The CEO of Kohl's, Michelle Gass, has said our top strategic priority is driving traffic. I the first one is pricing tactics. Actually, that's probably the most common, but they have their own way of doing it. I don't know if you've been to Kohl's, but they have so many promotions and sales that they actually have these electronic signs to keep up with them. Here we have 50% off a quilt set. I don't know, but that might get a few people into the store. Then there's Kohl's Cash. If you're there at the right time, you'll get $10 of Kohl's Cash for every 50 you spend. And remember, Kohl's Cash is as good as Cash, except it only has value at Kohl's during a specific period. So I guess it sort of forces you to go to Kohl's during a specific period. It's a way for them to increase foot traffic during the times they want it to be increased. Next up, I should talk about the malls because they have not been doing the best, and I t I say that because for a w 20 years ago, about a quarter of their locations were in malls, whereas today it's only 7%. So when the malls have issues, it currently only affects 7% of their stores. The next reason is their switch toward more national brands and away from proprietary brands. Put simpler, they've placed a growing focus on the more popular, well-known brands Proprietary brands have typically made up about 50% of their sales, but over the last few years, it'slowly decreased to 40. Under Armour is a good example. That's a national brand, and in early 2017, they made a deal that allowed them to sell it in their stores. These national brands can potentially do a better job attracting new customers. Imagine that Under Armour deal brought in some people that don'typically shop at Kohl's. They've sacrificed to it too. The private labels almost always have better margins, but they're more concerned with the traffic in the sales than their income at the moment. They've been leasing out portions of their space. They simply clear out a large section and split it off and then have it turn into a planet fitness. Some of the deals have been with Planet Fitness, and then some of them have been with Aldi. They are shrinking their locations, collecting money from the businesses leasing that space and, hey, going back to the foot traffic t If one of those runners happens to need a new pair of Under Armour running shoes, that can be good for Kohl's. Alright, I saved the biggest one for last. Amazon Returns. Sounds In July of 2019, they started accepting free Amazon Returns at all Kohl's locations, w The motivation be If you have to return something to Amazon, you can conveniently do it at Kohl's and now that you're already there, you're gonna be more At the time of the announcement, their CEO said, The nationwide rollout of the Amazon Returns program is our single biggest initiative of the year. All the initial data seemed to show a positive impact on their same store sales bounced back wit Their CEO then confirmed that it was successful increasing traffic. T I mean, with n But then, on the negative end, their first holiday season with the program in 2019 still saw underwhelming sales. They're actually a bit lower than the year before. Plus, do you really want to make yourself so reliant on Amazon? The partnership actually sparked this r I don't know, but Amazon has been expanding their physical presence, exemplified by their bookstores and their 2017 acquisition of Whole Foods. Plus, Amazon has all these private label clothing brands and it'd be nice to have a national chain of stores There's too much to analyze here, and it's all r Let me know in the comments, what do you see for the future of Kohl's? So far, they've been a little bit ahead of the curve and have done some major t So do you t Are they going to start growing again? Are they going to shrink? What's going to happen? I should mention, they gave their first ever dividend in 2011 and have been increasing them ever since. So that can indicate that they're perfectly happy with being at t Also, Kohl's being a grocery store. I don't know, it's just funny. What do you t With the tobacco companies and A&P, I'd